Merger Mania Spreads To New Ground As Regulation Shrinks

July 12, 1985|By New York Times News Service.

NEW YORK — Last year, the big players were oil companies, with their staggering multibillion-dollar deals. This year, the focus in the ever-rampant game of mergers and acquisitions has scattered, jumping to broadcasting, health care, consumer brands, banks, the airlines and two newly acquisitive giants: General Motors Corp. and International Business Machines Corp.

In fact, few business sectors have escaped the fast-paced buying and selling in the first six months of 1985. Beyond the blockbusters, hundreds of companies sporting more moderate price tags have been bought and sold. By one count there were 793 deals completed in the first quarter alone.

Deregulation is spurring consolidation in such industries as broadcasting, banking and the airlines. An easier antitrust climate has also eased the way for corporate giants, such as GM and IBM, to enter the playing field. Such combinations would have been practically unthinkable 10 or 15 years ago.

Creative ways of financing mergers have also sprung up, but what most impresses some experts is that many companies have accepted mergers and takeovers as part of long-range strategy.

``Certainly 15 years ago, acquisitions were made as a separate thrust,``

said Albert T. Olenzak, corporate planner at Sun Co. ``There were some that acquired and some that didn`t. Today, acquisitions and divestitures are considered a normal part of carrying out corporate strategy.``

This is happening despite the failure of many of the publicized mergers. The track is littered with companies that have taken on new businesses that turned out to be losers, often because the acquiring company did not understand the operations they purchased. Acquisitions experts say it is getting more difficult to find companies to buy without paying prohibitive premiums.

Current corporate catchwords are ``restructuring`` and ``maximizing shareholder value.`` It turns out that the best defense against corporate raiders is to beat them at their own game of trying to drive up a stock price. ``The basic thing is when you strip away the Icahns and the Pickens, all the mega-mergers, the vast majority of the mainstream things are very strategically driven,`` said Martin Sikora, editor of Mergers and Acquisitions magazine.

The blockbusters are still very much in evidence this year, though they are not as big as Chevron`s $13.2 billion purchase of Gulf last year or Texaco`s $10.1 billion acquisition of Getty. Still, the numbers did reach record proportions outside the oil patch:

-- Hospital Corp. of America proposed a merger with American Hospital Supply Corp., in which American Hospital`s shareholders would get some $2.5 billion for their stock. Later, in a competing bid, Baxter Travenol Laboratories Inc. offered $3.7 billion for American Hospital.

-- Ted Turner, the Atlanta broadcasting entrepreneur, is seeking a $5.4 billion takeover of CBS Inc., to be financed with high-interest securities, or so-called junk bonds.

-- GM outbid other companies for Hughes Aircraft Co., for $5 billion in cash and stock, in a strong move into high technology.

-- Allied Corp. has agreed to acquire Signal Cos. for $5 billion in a combination that would result in a huge industrial complex of high technology and aerospace.

-- Capital Cities Communications Inc. is snapping up the much-larger American Broadcasting Cos. for $3.5 billion.

-- Rupert Murdoch, the publisher, is seeking a group of independent television stations from Metromedia Inc. for $2 billion.

GM and IBM, which have seldom made major acquisitions, began last year to do so as they pursued their business strategies. GM bought Electronic Data Systems for $2.6 billion, and IBM purchased the 77 percent of Rolm, a telecommunications manufacturer, that it did not already own, for $1.3 billion.

This year, GM is seeking Hughes, and IBM is allying itself with MCI Communications Corp. in an agreement to buy up to 30 percent of the stock of the long-distance telephone company.

``Truly, we are not just talking about merger for merger`s sake,`` said Alfred Rappaport, a mergers expert at Northwestern University. ``These are parts of strategies for transfer of technology and productivity. The motivation is quite clear.``

Olenzak, the Sun Co. planner, said of GM`s move: ``They are designing a corporation for the year 2000.``

In the broadcasting industry, more mergers are expected, because the Federal Communications Commission has allowed a single owner to hold up to 12 television, 12 AM and 12 FM stations, up from seven in each category.